Oil prices fell 3.8% in a week, but further decline is limited so far

After hitting a 4-month high of $82/barrel last week, March Brent crude futures fell 3.8% to $79/barrel (+9% month-on-month). This came amid President Trump's threats to impose a 10% tariff on Chinese goods, which could start a new trade war and reduce global oil demand. However, further price declines are limited by plans to tighten US sanctions on Russia and its exports if Putin does not start talks on Ukraine.

 

The decline in oil prices is weighing on the prices of vegetable oils and corn, which are used in biofuel production. And Trump's plans to end support for the biofuel industry could exacerbate the negative impact.

 

The snowstorm that hit the US over the weekend supported gas and oil prices, but as temperatures rise by the end of the week, the impact of the weather factor will gradually disappear.

 

China, the world's largest importer of crude oil, in 2024, amid a slowdown in development, reduced oil imports by 1.9% compared to 2023 to 553 million tons, which became a key factor in pressure on quotes.

 

Global crude oil inventories on tankers that have not moved for at least seven days rose 2.5% to 54.23 million barrels in the week of January 11-17, confirming the decline in demand.

 

Indian banks began blocking payments for Russian oil after the tightening of US sanctions against the Russian "shadow fleet", which covered more than 180 tankers, as well as Gazpromneft, Surgutneftegaz, insurance companies and six top managers of oil and gas companies.

 

In the first 10 months of 2024, Gazprom Neft and Surgutneftegaz exported an average of 970,000 barrels of Russian oil daily, accounting for about 30% of tanker shipments, Bloomberg reported. However, in the week of January 13-19, exports fell by 260,000 barrels/day to 2.75 million barrels/day, which will limit further declines in oil prices.

 

US oil production fell 0.6% to 13.481 million barrels per day between January 4 and 10, slightly below the record high of 13.631 million barrels recorded on December 6. At the same time, the number of active oil rigs in the US, according to Baker Hughes, fell by 2 to 478, reaching a 3-year low after a peak of 627 rigs in December 2022. This suggests that Trump's plans to increase oil production look realistic, and the decline in supplies from Russia may be partially offset by increased production in the US.

 

The settlement of the conflict between Israel and Hamas, as well as a potential change of power in Syria, which could increase oil exports, will also contribute to lower oil prices in the near future.